Plunging demand for soy oil in China is expected to cut consumption of the oilseed in the world’s biggest user as lockdowns to prevent the spread of COVID have shuttered restaurants and canteens, according to traders and analysts. China is the world’s top consumer of edible oils, with millions of restaurants guzzling about half of the country’s roughly 17 million tons of soy oil, made from crushing soybeans.
But a two-month lockdown in Shanghai, China’s largest and wealthiest city, and anti-COVID-19 movement curbs in several other major cities including the capital Beijing, have cut soy oil consumption, which will carry over to demand for soybeans.
Demand for all edible oils in the 2021/22 marketing year beginning last September is set to drop 8.45% from a year ago to 39.02 million tons, the first decline this century, according to the National Grain & Oils Information Center, a government think-tank, because of the lockdowns, high soybean prices and substitution with animals fats.
Soy oil consumption in March fell 11% and by 15% in April from the same periods in 2019, before the COVID pandemic, according to estimates by Mysteel, a China-based commodity consultancy. Overall soy oil usage will be 16.74 million tons in 2022, down about 500,000 tons from 2019.
For the 2021/22 crop year, the U.S. Department of Agriculture (USDA) estimates China will consume 17.4 million tons of soy oil, down from 17.6 million tons in the 2020/21 period. The USDA predicts consumption to rebound in the 2022/23 crop year to a record of 18.05 million tons.
The slump in soy oil demand is expected to impact China’s overall bean imports. According to two China-based traders at international trading companies, the country has only covered about 30% of its monthly soybean import demand for July and only 20% for August.
The weak edible oil demand comes as soybean crushers already face poor demand for soy meal, the protein-rich animal feed ingredient also produced during the crushing process.
China’s industrial animal feed output in April slid nearly 11% from the previous year to 22.49 million tons, with pig feed down 15.2%, because of expensive raw materials and weak hog production margins, according to the China Feed Industry Association.